The city is girding for Round 2 in a legal battle with Canada's biggest billboard companies over a tax that was expected to yield over $10-million per year.

In a decision earlier this month, the Ontario Superior Court ruled that Toronto's billboard tax was above-board, but it did not apply to any billboard erected before April, 2010 - or roughly 95 per cent of all billboards in city, according to one industry estimate. The ruling came with a hefty toll, negating $8.6-million the city has collected since the tax came into force in 2009 and the roughly $9.3-million it had hoped to collect in 2011.

On Thursday the Planning and Growth Management Committee voted unanimously to adopt the city solicitor's recommendation to appeal Justice Michael A. Penny's verdict. The decision quickly prompted the billboard industry to redouble its legal assault on the tax by filing an appeal of its own, challenging again the constitutional and jurisdictional validity of the by-law.

"If the city is appealing the decision, then so are we," said Rosanne Caron, president of the Out-of-Home Marketing Association (OMAC), a group representing Astral Out-of-Home, CBS Outdoor, Pattison and other large billboard companies that launched the original legal challenge. "Ultimately, we would like to find a solution with the city. It was never our intent to pursue litigation."

For now, an amicable outcome seems unlikely. Councillors on the committee said they were worried less about the millions in lost city revenue and more about the troubling legal precedent Judge Penny may have set in his decision to grandfather the tax.

"It would be like introducing an income tax and saying that only people born after a certain day were subject to it," said Councillor Peter Milczyn, chairman of the committee. "It's an important legal principle that this city must fight. If we let it stand, it leaves some of our other programs open to legal challenge as well."

The committee's unanimous decision was somewhat surprising considering it includes several key supporters of Mayor Rob Ford, one of 12 councillors who voted against taxing so-called third-party billboards in late 2009.

"Even if the mayor wanted to repeal the tax, I would hope he would still vote to appeal," said Mr. Milczyn. "This comes down to a fundamental issues: Does the City have the right to tax?"

Council has the final say on whether to appeal.

The 2011 billboard fee ran from $1,150 to $24,000 a sign, depending on the size and type. The city originally planned on reaping $11-million from the tax, less $1.8-million to enforce tougher billboard rules passed at the same time.

But the court decision cut that expected bonanza down to a paltry $800,000 for 2010 and $1-million for 2011. The ruling was a blow to arts advocates in the city who spent years pushing for the tax on the condition it pay for public art. The city decided instead to put the money in general revenues.

"We're still hopeful the city will do the right thing," said Devon Ostrom, co-founder of Beautiful City, a coalition of arts groups that lobbied for the tax and is now pressing council to appeal. "We've had a very positive response from councillors across the political spectrum."

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